UC San Diego

My thesis analyzes the process of licensing university inventions by start-up and established firms. In particular, the licensing procedure involves the use of secrecies, which are confidential agreements used by firms to learn about the quality of invention. My first two chapters of the thesis describe the quality characteristics of the secrecy agreements and analyze the efficiency implications of the secrecy device. In my last chapter, I describe the differences in licensing behavior between start-up and established firms with respect to the invention's stages of development. I use a unique data set based on licensing activity at University of California, San Diego. I match this data set with the grant data obtained from the Office of Contracts and Grant, UCSD for the period 1986-2003. I find that secrecy agreements can be used by firms as a contemporaneous measure of invention's quality, in their licensing decision. In addition, the secrecy device enhances weakly the efficiency of the licensing secrecy and the gains in welfare are proportional with the difference in production cost of established firm and the inventor. In my last chapter I find that the odds ratio of licensing by start- ups relative to licensing by established firms is lower for more advanced stage inventions. This result can be used to analyze other complex issues regarding the licensing process, like efficiency and the role of asymmetric information in start-up formation